Break Even Analysis

Specific method of presenting and

studying the inter relationship between

costs, volume and profits.(CVP Analysis)
An * tool of financial analysis impact on

Profit with a change in volume, price, costs

and mix accuracy.

 A business is said to be breakeven when its

Total sales = Total cost

Break Even point is a point where no profit

or loss .
At this point FC = Contribution

BEP Calculation
BEP (in units) = FC/ contribution Per Unit

= FC/ SP-VC
BEP (sales) = FC/ contribution Per Unit *Selling

price

= FC / P/v ratio

BEP = FC/FC+NP *sales

BEP = FC/Contribution *total sales

Volume of output sales to made to earn a desired level of profit

Units to earn a desired level of profit:

= FC +Desired Profit /Contribution Per Unit

Sales to earn a desired Profit: = FC+ Desired Profit /P/vRatio

Calculate the BEP

Production in units =10000 Sales price = Rs 5/- per unit Variable costs = Rs 20000 Fixed costs = Rs 12000/-

 The total fixed cost of a company are Rs 210000/- per annum;Variable cost per unit is Rs 7/-.The company sells products at Rs 10/each. Compute the units of sales and amount of sales at which the company will breakeven.

Calculate BEP
The fixed costs for the year are Rs 80,000;

variable cost per unit for the single product being made is Rs 4/-.Estimated sales for the period are

valued at Rs 200000/-.The no of units involved

coincides with the expected volume of output. Each unit sells at Rs 20/-

Find BEP in units

Selling price per unit = Rs 12/ Variable Cost per Unit Rs 7/-

Fixed costs Rs 1,75,525

 A company budgets its marginal contribution as Rs

45,000/- .The sales and fixed costs are budgeted as 225000/- and 60000/-.calculate breakeven sales.

 A company estimates that next year it will earn a

profit of Rs 50,000.The budgeted fixed costs and sales are Rs 2,25,000/and Rs 9,93,000

respectively. Find out the breakeven point of the company.